Buying a house is not a random decision of life.
Availing a home loan either to purchase or construct a house requires a thorough homework on the borrower’s part.
The question arises as to which home loan product would be most suitable for you, which interest rates will fit your budget, what would be the tenure of your loan etc.
The most difficult task is selecting the most suitable option from the varied types of home loan products.
However, in this article, we have collated few tips that will assist you in taking this decision wisely.
1.Research before availing home loan:
No matter what kind of picture your advisor may portray of the home loan product, it is always advisable to do your own good research.
Always put in your efforts to know about the best deals available in the market.
Speak to a couple of agents; consult your peers who have already availed the home loan and then go ahead to seek the best option available for you.
Knowing about interest rates:
There are two kinds of interest rates prevailing in the market.
- Fixed interest rate remains fixed for a certain time period. It is not market linked and the rate is pre-determined as mentioned in the loan agreement.
- Floating interest rate is market-linked. There is always a base rate following which the floating rate is calculated.
For example, Base rate is 2%.
The floating rate is 3% above the base rate. Hence, the floating interest rate is 2% + 3% = 5%.
In the long term, floating rates, deliver cheaper costs in comparison to the fixed interest rates.
So a borrower should know about the prevailing rates of interest and then go ahead with the home loan product.
Check the Credit Information Bureau (India) Limited (CIBIL) score:
CIBIL rates your credibility with a credit score, basis which you get the home loan. In case your credit score is 750 plus, you can get an easy home loan approval. In case the score is lower than the mentioned credit score, either the loan application is rejected or a higher interest rate is charged from the borrower.
To know more about CIBIL Score join: Credit Appraisal Process Course on Elearnmarkets.
Comparison of processing fee of various home loan products:
The processing fee may seem to be just a percentage of the loan availed. However, the higher the loan amount is, the higher is the amount of the processing fee. Different rates are provided for different home loan products.
Do compare the processing fee of various available options to reduce the aggregate costs of the home loan product.
Watch the video below to know more about points to keep in mind before availing a home loan:
Read the documents carefully:
This may seem to be one of the most tiring efforts on your part. But reading out that the booklet may prevent you from getting any surprises at a later stage.
Kindly read all the terms and conditions before signing the loan agreement in order to enjoy the hassle-free future.
Keep a watch on your spending. This means that once you have availed the loan, manage your expenditure, save more and try to pool in the additional funds at the time of foreclosure of the loan.
Usage of additional funds:
When you save more, you also have an option to park your saved funds in the loan accounts. This will help you to reduce your outstanding amount and eventually will levy a lesser burden on the monthly installments.
Prevention is always better than cure.
Hence, the more you cushion yourself with the above steps, the simpler it becomes for you to enjoy the perks of the home loan.
Plan your dreams & go ahead to build one.
You can also check “Understanding Credit Cards & loans“.